Correlation Between Transamerica Financial and Thornburg Core

Can any of the company-specific risk be diversified away by investing in both Transamerica Financial and Thornburg Core at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Transamerica Financial and Thornburg Core into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Transamerica Financial Life and Thornburg E Growth, you can compare the effects of market volatilities on Transamerica Financial and Thornburg Core and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Transamerica Financial with a short position of Thornburg Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Financial and Thornburg Core.

Diversification Opportunities for Transamerica Financial and Thornburg Core

0.91

Correlation Coefficient

Transamerica Financial  Thornburg Core

Almost no diversification

The 3 months correlation between Transamerica and Thornburg is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Financial Life and Thornburg E Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg E Growth and Transamerica Financial is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Transamerica Financial Life are associated (or correlated) with Thornburg Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg E Growth has no effect on the direction of Transamerica Financial i.e., Transamerica Financial and Thornburg Core go up and down completely randomly.

Pair Corralation between Transamerica Financial and Thornburg Core

Assuming the 90 days horizon Transamerica Financial is expected to generate 2.24 times less return on investment than Thornburg Core. But when comparing it to its historical volatility, Transamerica Financial Life is 1.74 times less risky than Thornburg Core. It trades about 0.13 of its potential returns per unit of risk. Thornburg E Growth is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,905  in Thornburg E Growth on September 2, 2024 and sell it today you would earn a total of  379.00  from holding Thornburg E Growth or generate 13.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Transamerica Financial Life  vs.  Thornburg E Growth

Transamerica Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Financial Life are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Transamerica Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Thornburg E Growth

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Thornburg E Growth are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Thornburg Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Transamerica Financial and Thornburg Core

The main advantage of trading using opposite Transamerica Financial and Thornburg Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Financial position performs unexpectedly, Thornburg Core can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Thornburg Core will offset losses from the drop in Thornburg Core's long position.

The idea behind Transamerica Financial Life and Thornburg E Growth pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .